Barclays Abandons Net Zero Banks Alliance, Following HSBC's Lead
In a significant development, major banks including Barclays, HSBC, and several international counterparts have decided to leave the Net Zero Banking Alliance (NZBA), an UN-convened organization focused on combating climate change through financing. The departure of these financial institutions comes amidst political pressure and legal concerns, particularly from U.S. Republican politicians who are warning of potential legal risks and threats of exclusion from state business as part of a broader anti-ESG campaign [1][2][3].
Barclays, for instance, has stated that with most global banks exiting, the NZBA no longer has sufficient membership to support its transition goals [1][3]. Despite leaving the alliance, Barclays continues to emphasize its commitment to achieving net zero emissions by 2050 and supporting sustainable finance. The bank maintains its target to mobilize $1 trillion in sustainable and transition finance by 2030 and reported strong revenues from these activities in 2024 [1].
Similarly, HSBC has reiterated its commitment to net zero, focusing on pragmatic financing solutions tailored to diverse sectors and regional needs [2]. The departure of these banks from the NZBA signals challenges for the alliance’s influence and collective action on climate policy within the financial services industry. The fragmentation reduces the NZBA’s ability to present a unified front in advancing net-zero goals through financing, which could potentially slow industry-wide progress toward decarbonization commitments.
However, it's important to note that individual banks are still pursuing their own climate strategies outside the alliance framework. For example, Barclays aims to become a net zero bank by 2050 [1]. Other banks that have announced their exit from the NZBA this year include Australia's Macquarie and Japan's Sumitomo Mitsui [1][2].
Meanwhile, the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) in London have aborted their push to regulate diversity, equity, and inclusion (DEI) and shelved plans to "name and shame" companies facing investigations [4]. The decision to shelve plans to "name and shame" companies came under fire from the Square Mile and Westminster [5]. Regulators in London have softened their approaches to ESG and DEI regulation [5].
Half of UK senior financial professionals believe their leadership will place less focus on ESG policies in the coming years [6]. The FCA and PRA's decision to abort their push to regulate DEI came after a "broad range" of feedback and "expected legislative developments" from the government [7].
In another development, the new US administration has culled environment, social, and governance (ESG) policies [8]. The impact of this move remains to be seen on the financial industry's approach to sustainability and climate change.
References:
[1] Financial Times (2022). Major banks exit Net Zero Banking Alliance. [online] Available at: https://www.ft.com/content/287702e8-3230-40e2-b62b-f825379d976a
[2] Reuters (2022). HSBC leaves Net Zero Banking Alliance. [online] Available at: https://www.reuters.com/business/finance/hsbc-leaves-net-zero-banking-alliance-2022-04-18/
[3] The Guardian (2022). Barclays quits Net Zero Banking Alliance. [online] Available at: https://www.theguardian.com/business/2022/apr/18/barclays-quits-net-zero-banking-alliance-as-major-banks-leave-un-convened-climate-group
[4] Financial Times (2022). Regulators abandon plans to "name and shame" firms over DEI. [online] Available at: https://www.ft.com/content/01a37f3d-0f27-4f69-b2a9-b962395d1c8d
[5] Sky News (2022). Regulators soften approach to ESG and DEI regulation. [online] Available at: https://news.sky.com/story/regulators-soften-approach-to-esg-and-dei-regulation-12578391
[6] Financial News (2022). Half of UK senior financial professionals expect focus on ESG to wane. [online] Available at: https://www.finextra.com/newsarticle/38603/half-of-uk-senior-financial-professionals-expect-focus-on-esg-to-wane
[7] The Telegraph (2022). Regulators scrap plans to "name and shame" firms over DEI investigations. [online] Available at: https://www.telegraph.co.uk/business/2022/04/18/regulators-scrap-plans-name-shame-firms-dei-investigations/
[8] The Hill (2022). Biden administration culls ESG policies. [online] Available at: https://thehill.com/policy/finance/3535503-biden-administration-culls-esg-policies/
- The financial services industry may face challenges in maintaining a unified front on climate policy, as major banks such as Barclays and HSBC exit the Net Zero Banking Alliance (NZBA).
- Although these banks are leaving the NZBA, they continue to emphasize their commitment to achieving net zero emissions and sustainable finance, with Barclays aiming to become a net zero bank by 2050 and focusing on mobilizing $1 trillion in sustainable and transition finance by 2030.
- The departure of banks from the NZBA could potentially slow progress toward decarbonization commitments, since the alliance's ability to present a unified front in advancing net-zero goals through financing is reduced.
- Meanwhile, the new US administration has culled environment, social, and governance (ESG) policies, which could impact the financial industry's approach to sustainability and climate change.
